"In a recent meeting, a client labelled the recession the “first SAP recession”. And undeniably, one of the key reasons behind both the severity of the recession, and the likelihood of a rapid recovery, is the speed with which U.S. corporations adjusted to the dramatic drop in demand.

(...)

Undeniably, US companies have savagely cut into their inventories in this cycle. But this is not all—they have also cut both capital spending and employment at a pace that has simply no historical precedent.

The sharp cuts in employment rates (implemented almost from the beginning of the recession) raises an important question: now that, thanks to SAP, Oracle and other management software, executives can see in real time how their businesses are faring, and make consequent immediate adjustments, will employment remain a lagging indicator?

Instead, could we not be going through the first cycle where employment is a co-incident indicator?"

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GaveKal Platform Company Fund Newsletter: June 2009